Saudi Arabia and Russia forged a risky oil-market deal about 18 months ago, agreeing to throttle back output in an effort to lift prices.

It worked. A glut of stored oil that helped keep a lid on prices is almost gone, and international crude is trading comfortably above $70 a barrel. Now, the two oil powerhouses still have to agree on what comes next.

Oil officials from the two countries will meet in Jeddah, Saudi Arabia, this weekend, ostensibly to review compliance among the 24 oil producers who agreed back in December 2016 to join Riyadh and Moscow in the cuts. They are also expected to discuss their intentions for the future of the pact, which is set to expire later this year.

Saudi Arabia and Russia will hold talks “on sending a signal on what they will do beyond next year,” according to an official from a member of the Organization of the Petroleum Exporting Countries, the oil cartel that has worked closely with Riyadh to implement the cuts.

Diverging Paths

While Saudi Arabia has tightened the spigots, Russia's output is creeping up.

Oil output, percentage of production cap

Russia

Saudi Arabia

106%

Production limits begin

104

102

100

98

96

2017

’18

Note: Since January 2017, Saudi Arabia and Russia have committed to cap production at fixed levels.

Source: International Energy Agency

Oil markets are watching closely. A strong show of support for a continuation of the pact could further underpin prices, when geopolitics and the threat of supply disruptions have been pressuring them higher. Producers “need to send the message that the agreement will continue,” said Jonathan Goldberg, chief investment officer at New York-based BBL Commodities LP, one of the world’s largest commodities-focused hedge funds.

The group promised to cut enough oil to reduce global output 2% from current levels. Such agreements are often hard to enforce, but this time around, the group did what it said it would. Countries have collectively cut back about 1.9 million barrels a day, or 1.98% of the world’s 2016 output—the benchmark for the cutting.

Those cuts, as well as rising demand from growing economies in the U.S., Europe and Asia, have helped almost completely erase a glut of oil in industrialized nations’ inventories.

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“Once the target [of ending the oil glut] is achieved, the question is what to do with it,” said Robin Mills, chief executive of Dubai-based Qamar Energy and a longtime OPEC watcher. “Russia and Saudi Arabia are not on the same page.”

Saudi officials want international prices above at least $75 a barrel, according to officials from OPEC members who are familiar with Riyadh’s thinking. Saudi Arabia needs at least $70 a barrel, according to the International Monetary Fund, to cover the costs of its ambitious economic reforms and its war in Yemen. It also has an interest in keeping prices buoyant as it contemplates when, or whether, to publicly list shares of its state-owned oil giant Saudi Aramco.

Russia, meanwhile, has telegraphed that Moscow thinks prices are high enough. The country needs much less to balance its budget—about $53 a barrel, according to Moscow-based broker Renaissance Capital. Early this year, Russian Energy Minister Alexander Novak told state TV that prices around $64 a barrel were satisfactory. More recently, he has sent mixed messages about what Russia will decide next.

Earlier this month, he said he hadn’t received any proposals to renew the deal, while suggesting separately that Russia was exploring options that included cooperation outside a formal extension of the agreement. He told Russia’s Interfax news agency on April 6 that the group still has the task of meeting the goals of the agreement, but also “the task of not overheating the market.”

Moscow is under pressure from its oil industry—made up of many private firms—to allow for higher output in fields these firms have spent heavily recently drilling. A spokeswoman for the Russian energy ministry said it wouldn’t comment before the Jeddah meeting.

Already, output in Saudi Arabia and Russia appear to be diverging. The kingdom surprised markets recently, saying it had throttled back an additional 40,000 barrels a day of output in March. That brings its own cuts 130,000 barrels a day below the level to which it originally agreed, according to the International Energy Agency.

Russia, though, has boosted output by 70,000 barrels a day since September, the IEA has reported, busting the production level it had agreed to in the deal.